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Wednesday, March 23, 2011

BREAKOUT IMMINENT

How many times have we heard this one? The miners are lagging. It's a sign that gold is topping.

Absolute baloney!

The miners aren't lagging, they are consolidating in an extremely bullish triangle continuation pattern.

I said in the Tuesday report that the miners would probably test the upper trend line this week and maybe even breakout. We may get that test as early as tomorrow.

Folks this is now moving into the momentum stage. During this phase of the C-wave we will see gold and silver grind higher day after day. It's not unusual to see the metals rise at a 70 or even 80% clip (7-8 days out of 10 are up days) during the final two daily cycles up in the parabolic blow off top that always unfolds as a C-wave comes to an end.

All K-1 filers, chill. Just study what you need to do or consult a taxidermist...

I can tell the new people about my story(snore, snore ).3/10ish/2010 I found Gary's site through a friend of a friend, Tim Knight's site and my friends site both had Gary listed. I was a trader then. I lost 1/3 of my IRA retirement and the wife said I was hooked to the computer and sadistically lazy. Well shoot, She whipped me and made me feel CHEEP.I jointed a men convent, with a few women they graciously allowed, and now I am a winner. I can tie my own shoes too!

Truth: I stopped shorting and fast trading and started SLOWLY reading and ASKING questions to the board here. From day one (1) other members helped me out. I did buy into the long position for gold and silver, trusting, from GARY, that the BULL would correct any ill-placed entry.

That last line above is critical in this writing. I openly accepted the writing of another human person, saying that I trust your knowledge and judgment. VERY HEAVY STUFF...Yes, the fine print says - invest at own risk,,,pride, etc.. I do see the logic and I DO ACCEPT THE RISK. Am I ahead after one whole year? Yes. will I continue to make money? It's a risk we all must accept or not accept.

Welcome all of you new people and I hope that you will grow in knowledge from Gary and this board.

Good luck to everyone, whether we are new members or are longtime followers.

New Folks, I was still trying to make up from losses from 2008 (Emerging Markets Eastern Europe). was making some money on Gold last year and I lit up. Then I found Gary, the best Gold/Silver guide you will find on the internet. I dumped all my other news services and trade alerts as they couldn't compare to Gary's insight and knowledge and patience to guide us along. Welcome all New Subs (Subscribers -took me a while to learn I was a Sub.)

Gary,I guess you missed my question at the top, we're still looking at the latter part of Aptil timeline... trip to Vegas the first week.. wife.. don't want to be glued to the screen.And, dollar index a concern?

So, about the K-1, if you had AGQ in an IRA, are there special tax issues? I had looked at MLPs at one point but decided against those because the can generate taxes that have to be paid even in an IRA. I have AGQ in another IRA account.

Thanks Poly for pointing out in earlier post that this is a secular bull market for gold/silver (unlike the 1980s) and hence, cycles analysis may be more effective this time for mitigating sudden collapses.

not sure if this has any weight or not but with everything going on in japan and the slow down and shut down of many companies that produce products there, will this affect the demand and supply of silver? I remembering reading that the demand (around 820+ mill) will outstrip the supply (around 700+ mill)because silver is put into everything we buy. With the shut down in companies in japan, will the supply start to increase over the demand and affect the price of silver?

The only time a swing has any meaning is when it potentially forms a cycle low. It's still too early in the cycle for this swing to signal a cycle low. The odds are this is just one of those meaningless swings that happen all the time.

I received the K-1 for AGQ that had an income component (not my gain but their income) that was more than my realized gain for the year! And I'm sure I never received a distribution as the gold/silver ETFs don't make distributions. I sent everything to my accountant tonight and will report back tomorrow on what he says.

Gary, I see your point in sticking to SIL. I owned MGN last month and sold on strength around 3.80. Two or three days later they announced a private offering. MGN fell to 2.30ish. I got lucky on that one.

I could not find anything on stock market in last nights report.What is your take on stock market now? I mean have you changed your view of EXTREMLY LEFT transalated cycle (as opposed to Doc's cycle count and guess on IT Low). Dollar is giving up gains (as expected), crude is rallying (as expected) BUT market is showing good STRENGTH? I would appreciate your inputs as i feel we are close to the moment of truth.

Gary, you have mentioned b/f that you would be worried that the dollar could rally if dollar bears reached extreme bearish sentiment. My wire service(IFR/Reuters) has dollar bulls at just 9% for 1 month out(their lowest reading in years). Whose sentiment numbers do you look at?

If you are right about the couple of up days and the half cycle pause. Then $40 would be a good half cycle pause. It is a big round number and if it reaches it in 2-3 days with the strong moves you are expecting, we would be around day 10. That's smack in the middle of half a cycle.

Gallo, AGQ is a Limited Partnership. There are special tax implications compared to equities. It is very possible you could lose money in your position and get stuck with a hefty tax bill. They are not immune from tax free accounts either. I avoid MLP's & LP's at all costs.

Bad start on my SPX short. I will cut some off quick as I love small losses (and hate moderate-sized ones). The signal works best when it starts off right away. If I sell 1/2 the SDS and we wind up dropping later, and i break even, no harm. I don;t mind missing a possible profit but do mind taking larger losses. (I wish I could figure out how to tweak the sells so they become as good as the buys).

Here is the info on the site and then links to this page and the FAQ where it is explained.

If someone got a K-1 - would you please share the amount per share (gain or loss) that they are hitting you with?

Thanks.

Rodney-----------------------------------Since this fund is treated as a partnership for tax purposes an investor’s allocated portion of any income, gains, losses and deductions is reported on a Schedule K-1. That means investors do not receive a Form 1099-DIV. For more information, please read FAQs on Commodity and Currency ProShares Taxation.

No distributions have been made for this fund.

All ETFs are required by the IRS to distribute substantially all of their income and capital gains to shareholders at least annually. For specific tax advice, we recommend you seek advice from a qualified tax professional.--------------------------------------

Sorry, the link didn't go thru on my iPhone (and gets truncated after I click on "publish" - I swear).

Here is the info on the site and then links to this page and the FAQ where it is explained.

If someone got a K-1 - would you please share the amount per share (gain or loss) that they are hitting you with?

Thanks.

Rodney-----------------------------------Since this fund is treated as a partnership for tax purposes an investor’s allocated portion of any income, gains, losses and deductions is reported on a Schedule K-1. That means investors do not receive a Form 1099-DIV. For more information, please read FAQs on Commodity and Currency ProShares Taxation.

No distributions have been made for this fund.

All ETFs are required by the IRS to distribute substantially all of their income and capital gains to shareholders at least annually. For specific tax advice, we recommend you seek advice from a qualified tax professional.--------------------------------------

http://www.proshares.com/funds/agq_distributions.html

Here is the key and faulty link....I am splitting it into 3 - you have to concatenate.

Another form of commodity ETFs that are taxed at an unfriendly rate are grantor trusts which hold physical metals, like the SPDR Gold Shares (NYSE:GLD) and the iShares Silver Trust (NYSE:SLV). These funds are deemed as collectibles by the IRS and taxed at 28%. *On the bright side, they do not generate realized capital gains or interest income.*

With all my lottery plays, I'm going for gold! I'm not selling out at 300% profit to watch it hit 1,500% 2 weeks later. We picked these lottery's because they have a "calculated" shot at a big pay day. So I will ride these to expiration or if I feel we've topped a daily cycle, like last cycle lottery) will try to dump at the top.

I might take 100 of 300 off the table @ $0.60 to pay for lottery. Still hoping for around $2 out of these, but wont be surprised to get $3.50, but more than prepared to lose it all.

What happens if silver leads the charge and hits our price target well in advance of a final gold parabolic move? Ie say silver hits $50, while gold is still hovering around not finished its grind to its top. Normally silver shouldn't correct while gold grinds higher, but silver is very volatile.

Poly and Keys: I believe there is no cycle that will help us at the top as they only time bottoms. We'll have some general idea as to timing because a bottom will be due in so-and-so many days, but I suspect Gary will just have us sell into the coming froth. That's why he says he always sells early. Especially if we start blowing off cycles can become distorted. Gary, is that right?

You're right DG, fully aware that cycles work on lows. But for this purposes, they still serve as a great guide to picking a top. If it's late in the timing band for a cycle low and we start to spike (typical top) that would be out sign to dump.

I know that's what you meant. It would be very nice and certainly possible ($2.30 not much the way she moves), but was trying to saying that it wouldn't be actionable, for me. Got to resist any temptation to cash them :)

I intend to hedge out my positions during the D-wave, as previously mentioned on this blog. Gary has been too bang on for me to ignore.

My scenario becomes a what happens if...silver really really takes off fast, and is so stretched beyond gold's pace that the reasonable thing for it to do would be for it to correct or consolidate. But in this scenario gold is clearly not done in its move upwards.

If we get to that point, we get to it I guess…but I think this scenario has a probability attached to it.

archrival,I think you might want to check the batteries in your calculator. At the recent top the S&P was up slightly more than 100% from the 09 bottom and still well below all time highs. Anyone who got caught and held through the bear market is still deeply underwater.

Miners on the other hand are up almost 300% and considerably above their 07 highs.

The general stock market isn't even in the same ball park as mining stocks.

Two years ago, George Soros said he wanted to reorganize the entire global economic system. In two short weeks, he is going to start - and no one seems to have noticed. On April 8, a group he's funded with $50 million is holding a major economic conference and Soros's goal for such an event is to "establish new international rules" and "reform the currency system."

A Schedule K-1 is a tax information form listing a taxpayer's share of income generated by an investment in a partnership. As one of the many benefits of an Individual Retirement Account (IRA) is the tax-deferral on all income generated in the account, you might be surprised if you receive a year-end K-1, which lists items such as taxable income and capital gains. Fortunately, in most cases, the tax-deferred status of your IRA is intact, and you do not need to report K-1 information on your IRA investments.

Guys and Gals, Because they are set up as Limited Partnerships, securities such as AGQ, UNG, UUP, et al, report at the end of the year on a K-1 as opposed to a 1099. Usually on the 1st page there is a list of what you report, and if not, it will be on actual K-1. There is no big mystery here. Just a different way than you may be used to receiving this information.

The facts are, this is another way to report, Interest Income, Net Short Term Capital Gains(Losses), Contracts and Straddles(these funds use these to create the leverage), and Dedeuctions for Investment Expenses.

The K-1 is really NO BIG DEAL.

As for being treated as collectibles. If they are doing that (I have no information on that yet), it would change your taxable rate on Cap Gains to a max of 28% from a minimum of 15%, although few of us hold long enough to get the minimum rate, so the taxes will be comparable.

Bottom line for all the hand wringers is, I would not let the tax tail be the wagger of the profit dog. Enjoy your gains, and give Uncle Sam your little piece of the pie.

I dont like "i told you so" kind of comments but looking back at my previous comments it would appear tha we have had the bounce and a re seasonally heading into highs in May. Im expecting the miners to hea into some seasonal bearish tendencies towards the end of march, those miners that hold up well will be the prime candidates for adding to the long side ahead of teh correction in equtiies in may. Right now im only concerned with seasonal trading. I believe some of the financials and commodity related stocks (Coffee) also look like they are heading higher into May.

Thanks! I thought that was the case. I had a couple of piddly ass K-1 numbers, I mean less than $50 each(!) for two small trades I did in my Roth IRA (which is a small account anyway). So I just ignored it figuring if I got audited I'd let the IRS guy figure it out. :-)

What makes Soros the economic god. He needs to be allowed to change things if they're going to be changed. Maybe he will be since some say he's the elite puppet master whose pulling the strings of presidents (and so-called presidents.)

someone also mentioned that daily prices will be baked with gain/loss. I think thats why over period of entire year its not very high gain per share. 2009 has 21 dollars per share. but since we hold only in profitable period of year, its possible in those months agq partnetship also shows large gain and so tax bill will increase. I still get point that tax bill will be less than hefty gains made but one has to remember there is going to be more tax that you would have paid on actual trading gains.

By the way, anyone know why gold/silver often sees selling pressure everyday around 11:00 EST. I know that you sometimes see it around 1:00-1:30 because of the Comex close, but am unsure why my limit orders always get hit around 11:00.

My AGQ K-1 only has entries in the Short Term Capital Gains box and the Other Income box (attributed to the contracts and straddles to create the leverage)

The Master Limited Partnerships (MLP's) are income generators intended for long term holdings as BLH mentioned as opposed to what we do with AGQ. In that case BLH would have the box for Long Term Capital Gains filled in, along with any other gains or losses.

On my form AGQ does NOT have the collectibles box filled in, so AGQ IS NOT treated as a collectible. It is taxed at normal Cap Gains rates.

Gary thanks for the comments. Sounds like i should start reading up on cycles, it took me probably 1 year to realise that technicals were geared against the public players, even proprietary indicators have limited functionality. Thats when i got into seasonal tendencies with decent success. However im becoming more interested in cycle analysis. Would the "terminology document" be available to subscribers?

I just picked up some GPL. Since we are early enough in daily cycle and GPL has been a leader since the IT low, I like the risk reward here. Will add more as if rises from here or cut it if it closes below the 10d MA.

What would be the next logical place for silver to either correct / take a breather? Would this be the half-cycle and, if so, when would that happen? If not then any other thoughts on when we could expect a breather or correction?

There are hundreds of non mining equities that have blown away the best gold stock over the last 24 months. You changed the parameters with your silly buy and hold arguement. Buy and hold has been dead for years.

One more question. I understand that the cycles are driving this move. However, do you think there is also perhaps a short squeeze going on at the same time and is that what usually happens during this last phase of the C wave?

Hotrod, Anybody can easily figure their rate. Dollars out minus dollars in divided by number of shares. Your tax rate on the gain will generally be the highest Sam has due to the short term nature of this holding. This can be anywhere from 0 to 35% depending on your other total income.

Do people on this board recommend having significant exposure to physical gold and silver in addition to paper? Obviously not as liquid during corrections but does provide some peace of mind in a worst case scenario.

My disagreement comes with the arguement that miners and pm's are the only place to be. I have traded both over the last 2 years and have had much greater success with tech stocks than miners.

As for the general market I think it will rise with gold in this C wave. I'm sure there will be a point when they decouple, just not now, imo. This is coming from someone that remains extremely bearish this economy and eventually the stock market again, but not until QE 2 has run its course.

Hope you guys welcome alternate views, if not say the word, I'll disappear. I'm not a beanie, et al.

I'm holding SLW June calls at various strikes DITM ($35, $36, $40). I'm up 75-200% + on them. Since it's SLW, liquidity is good, so getting out at a decent price is not an issue.

In light of the anticipated blast off, should I stay with these positions, or roll all or part of them up to a higher strike at the same expiration? I could also roll them out to September, but I'm not sure there would be an advantage to that since the C-wave should be over long before. With the wind at our backs, I'm thinking now would be the time to add a bit more risk.

I thought if the K-1 showed anything, which mine did not, that this would be what is taxable.

Now, I am below 59.5 so this maybesomething I will need to know when I reach that mark and have to declare cap-gains... I am sorry if I said this is a non-issue. I guess age may be a factor. I hear it stinks getting older...

Archrival: Alternate views are always welcomed here. Just...1. Offer the alternate view with respect for Gary/us2. Give reasons for it and be precise3. Don't repeat your position over and over4. Have a reason for posting Shouting ("We're goona zoom!" is not a reason for posting)

The only guys who get run out of town are the obnoxious ones or who show up to gloat every time they are right for five minutes. Fair enough? [I have to say even the name "Archrival" sounds like you are looking to pick a fight.]

I have June 35s and 40s as well...and this morning had an order loaded to add more but just couldn't push 'enter'. I was looking at June 45s...wish I'd done it!

In my view, higher strikes might be OK, but I'm fairly conservative, so I would try to stay lower than where I expect the move to end...plus i'd try to sell while the price is still rising. September might just cost you more.

For me, I am taking money off the table NLT Tuesday and set a buy stop on my next trade and walk it down into the daily cycle low. Rolling April to May. September puts you in the teeth of the D wave, I imagine.

Remember pressure comes off the shorts by Tuesday, which ties beautifully to the half cycle high.

According to the screener on FINVIZ.com number 4 performer of all 6762 issues they track was AG, GPL was #6 and AGQ was a respectable #18 with 325% gain. As a holder of AGQ (sold all of my miners and moved everything into AGQ some months ago) I would like to know how I could have done better holding any other basket of equities. Have YOU done better than 325% over the last 12 months?

hope this is not too stupid a question but will you be tempted to sell a small amount of your non-core position when silver takes a breather at $40? You could then get back in at say $36/37 for the next ride up. I'm not suggesting a large trade - perhaps 10-15% of the overall funds invested.

Tudor, I am still holding SLW June 30's bought at the Jan low. Currently up 300%. Last cycle a similar play did 1500%. I will hold them until Gary says we should exit. I did add June 41's at the daily cycle low, but I hate to buy calls into strength.

Dollar is barfing up all of yesterday's gains. So glad I'm on the PM train. Primarily in AGQ with some ITM options on SLW and SLV (no SIL or juniors) to get 1.4x leverage (no margin). I plan on unloading the options (or at least selling calls against them to lock in gains) as the risk/reward ratio increases towards the end of the next daily cycle.

Tudor,I'm in similar options as you - May or June at the latest. I think you'll just take on unnecessary premium rolling out to September. If things change (dollar 3 year cycle low gets pushed out to August) I may consider rolling out to the fall months...Mike

archrival, I have AG, AXU, CDE, EXK, FVITF, GPL, HL, MVG, PZG, SLW, and SVM for silver plays. I spread it out in case of a blowup, which I have had happen. A few jr golds like AAU, GORO, NGD, but mostly silver miners.

Brian, nice play. Here's hoping for a repeat. I also had a small (3 contracts) position of Jun 31's that I've held from $4 to $15+. The delta was at .90. I just rolled the entire position up to Jun 45's. I think I might roll up about a third of my DITM positions and let the majority of them ride.

Mike: I am almost never 100% invested and always have some cash or at least margin around (for when things like Japan happen---I did well buying into that). If I don't own more AGQ it's not due to lack of funds, so other trades have no effect on my PM holdings. It's not "either/or."

I have a friend who has been accumulating silver now for over 3 years. He was not aware of the ABCD pattern, or the cycles the dollar follows. He does not doubt that silver could go to $50 or higher, but does not want to sell his physical silver either. Apparently, he has to pay 6% Kentucky sales tax on it, plus the other tax consequences. Any suggestions on how to best hedge his physical holdings once silver hits $50? I thought about puts, but I suspect the volatility at that time could work against him.

archrival,THE WORD.hokas pokas.No offense intended.I for one just read Gary's comments on this blog. I do not read this blog to get alternate views from other forum members. I am here for a specific reason. Not to chat, but I have done that; so I understand. I know you think that no harm is done, but it can get confusing; and we do not want to be lead astray.

Thanks a lot for the Power Shares link. I see that I can actually download my K-1 data into Turbo Tax and let TurboTax figure out the tax due. Since TurboTax keeps a running tally of the total tax due I will immediately be able to see the impact of the AGQ K-1 once I import it - very cool!

I will report back my experience once I have done this - maybe this weekend.

Mike and Tudor, I am not rolling up and out because it is apparent the 3 year dollar cycle is unfolding as Gary has been preparing us for years. Seems silly to me to buy more time premium and give up DITM options.

I only read this blog because Gary posts in it. I have been with him long enough to know that there is a very small chance that I am ever going to find better advice anywhere, etc. I have stopped looking for better alternatives at this point.

I would rather not be tempted by any alternatives that might lead me astray. Sorry if I am coming on too strong. No offense itended. Cheers.

401K funds (FKRCX & INIVX, only two worth a damn I have access to) are green and getting greener, already outperforming the S&P by >6% in only a month. Thanks for constantly reminding that this bull will correct any entry timing errors; so far so good.

Now let's just sit back and have fun watching the fireworks for the next month or two, eh? Wish I could enjoy the view from the Matterhorn peak someday. My Swiss-born co-worker says it's spectacular. Found an interesting story about climbing it: http://www.derwanderer.net/2008/07/27/the-matterhorn/

archrival, The part you did not ask about are the big alpha generators. From the intermediate low we are near 80% gains on AGQ. At the low I also buy small option positions on the silver miners. The junior miners themselves are considered my core.

Regarding AGQ's partnership structure and K-1, it would be unwise to ignore the tax consequences.

As an 'owner' in the partnership, you will have income or losses associated with your share in units of the partnership that are in addition to those that occur by buying at one price and selling at another.

In my case, my share of the partnership income was offset by my share of the partnership expense which was added to the cost basis. So, income was higher but so was cost basis of the shares I sold. It ended up pretty close to a 'wash'.

However, if I didn't sell AGQ at all last year, I would have had to recognize the additional 'phantom' income and pay taxes on that, while waiting to sell the shares to get the corresponding benefit in cost basis.

So, if you hold AGQ versus trade AGQ shorter-term, and your tax bracket changes a lot from year-to-year, you may want to think about how this investment vehicle impacts your gains.

me too, i will hold my physical position through the D wave.the reason for me to do this is because i don't regard it as an investment, but as a getaway ticket to start over if/when things get ugly, and i really hope it doesn't get that far.

Brian said: "Mike and Tudor, I am not rolling up and out because it is apparent the 3 year dollar cycle is unfolding as Gary has been preparing us for years. Seems silly to me to buy more time premium and give up DITM options."

That certainly is a reasonable, defendable approach. I also bought at or near the intermediate lows and have decided to let most of the position run. But based on Gary's work and conviction that the momentum is about to take off, I'm going to back out a third and use it to increase my leverage a little. I'll still be ITM by a few strikes. Same expiration (June), though.

Alrighty, I surrender with my baloney argument :) The low volume all-clear signal has been sounded. Demark indicators for Dollar exhaustion on the DAILY and WEEKLY are down at 74.90. MONTHLY is 72.5. At 72.5, I would look to scale out of your gold/silver trades. For sure, the DXY could overshoot to new lows - anything can happen - but the down dollar trend is your friend until it isn't as people witnessed in the early 80's and mid 1995. Just don't get greedy - follow Gary and you will be OK :)MONTHLY SPX Demark needs a higher high either in April or May to record a 1-4 month Sell Setup - good from June to September.

Tudor, I understood about your position size. I guess the only way I would add options is if the correction between the 2nd and 3rd daily cycle were sharp enough to give me great prices. I have had enough bad experiences with options. I only want to buy them when prices are falling sharply. Definitely not when they are rising sharply. The AGQ covers me during these periods well enough.

Investing in the financial markets can involve considerable risk. Past performance is not necessarily an indication of future performance. The information included in The Smart Money Tracker and The SMT subscribers daily updates is prepared for educational purposes and is not a solicitation, or an offer to buy or sell any security or use any particular system. Information is based on historical research using data believed to be reliable, but there is no guarantee as to its accuracy. G.D.S L.L.C., nor Gary Savage, do not represent themselves as acting in the position of an investment adviser or investment manager for funds that are not under their direct control and fiduciary responsibility. GDS L.L.C., Gary Savage, will not provide you with personally tailored advice concerning the nature, potential, value or suitability of any particular security, portfolio or securities, transaction, investment strategy or other matter. From time to time, GDS L.L.C., Gary Savage, may hold positions in securities mentioned, but are under no obligation to hold such position.